Stronger together

In this issue, The Hardware Journal sat down with Keith Giblin – CEO of Allied Merchants Buying Association (AMBA) – to talk about how his group is helping members navigate the ever-changing merchant and retail landscape.

Could you tell our readers a little about your own background? How has experience in a variety of different fields benefited you in your current role as CEO of AMBA?

I focussed on finance in my university education, graduating from DCU with a BA in Accountancy and Finance in 2001. I then transitioned to fund management, working at BISY’s in Dublin and JP Morgan in Sydney, where I resided for two years. On my return, I worked in import and distribution and finance for a further four years and, in 2009, I moved to the merchant and retail industry, providing margin software applications, consultancy and margin development programmes to businesses. This gave me a greater insight into the pressure merchants were under to maintain and grow margin. Helping retailers improve efficiency and maximise profitability gave me a fantastic opportunity to work very closely with merchants to maintain and grow margin to enhance and deliver value, profit and growth to their business, which continues to be my job to this day. In 2011, I began working with six founding members and John Murphy to form Allied Merchants Buying Association. Following three years working alongside seven members, I became CEO in May 2014.

Can you tell our readers about Allied Merchants Buying Association? What is the general outline of its structure, and what are its main objectives?

We are an all-inclusive member buying group of leading independent timber, building supplies, plumbing, hardware, décor, garden, agricultural trade and homeware retailers. When we formed in 2011, the marketplace in Ireland was highly competitive, therefore we believed in establishing a model that would collectively negotiate with partnered suppliers but maintain a low-cost base. To this day, we want to grow the market share of participating suppliers while improving the net profitability of members. We provide a platform by leveraging collective negotiation power with suppliers on behalf of members, and our commercial belief is that we enable members and suppliers to achieve incomparable results by utilising our merchants and the quality of their stores. We aspire to the highest level of category management excellence, ensuring members receive these benefits in their entirety.

In all our activities, our mission is to “Make members more profitable”. How we have achieved this mission has evolved over the years, but this remains the core of any undertaking we engage in and our principal purpose. Two elements we embrace are: 1) Preserve our Core Values, and 2) Stimulate progress.

Our members are extremely proud of the relationship and bond that exists between us. Our members work so well together because they each have a voice, and we promote a combined decision-making process, but we are very clear on preserving our core values of Trust, Integrity, Transparency, Commitment and Accountability. We stimulate progress by committing to challenging goals and projects to which we channel our efforts, and our recently completed five-year strategic plan details a continual process of relentless self-improvement with the aim of doing better and better.

You’ve been in your current role as CEO of AMBA for approximately four years, but have been with the group for almost twice that time. What major changes have you seen within the group as well as across the industry as a whole, during that time?

Some of the largest changes have been our numbers. We began with six members and 15 stores, with purchase turnover of €22m in 2012. We currently have 19 members with 85 stores nationwide, and will have a purchase turnover in excess of €180m in 2018, partnering with 180 suppliers. These types of metrics are sometimes used to measure success and they are important, however so too are operating costs. As an organisation, we are committed to running a lean-yet-highly-effective organisation. Doing so solidifies our legitimacy as a business that exists not for the purpose of profit, but with the sole goal of strengthening our members.

Another change was streamlining our suppliers to partner with those who share our strategic objectives. This had a large impact on the level of support of our partnered suppliers. Our compliance rate for 2017 was 91% in dealing with Approved Suppliers, which is significant in that members see the benefit in supporting our group deals
as do suppliers. This creates not only a “Win-Win” for members and suppliers, but a “Win more, Win more”.

We have seen huge improvements in the process of our Category Management and all our category management teams recently completed an executive programme in Negotiation in partnership between AMBA and Trinity College. Our structure still remains that our store owners and managers are part of the negotiation with suppliers on behalf of our members, and this is important as they are on the frontline of the day-to-day activity in the marketplace. Within the industry, members have adapted to changes, including a shift towards higher specification requirements, and EU certification being driven by tighter building regulation requirements, and the need for products offering higher levels of performance.

Accelerated construction methods and the changing nature of doing business including on-line – where the customer is less focused on loyalty and more focused on price – has forced members to change ways of driving business.

Merchants operate in a fast-moving, fast-changing environment. What do you as a group consider the most significant obstacles in the next two to three years?

Two significant obstacles to business growth, due mainly to uncertainty, are Brexit and the tariff regime that the USA is increasingly resorting to. If these actions lead to a downturn in economic activity in America and further afield, our economy will undoubtedly suffer. It will drive up costs globally and reduce demand. As for Brexit, the likelihood of a ‘no deal’ seems to be looming ever larger, with the possible consequence of a hard border. Naturally, there is the reality of climate change, challenging members to embrace the opportunities posed by the shift towards the technologies that are key to establishing a renewable energy economy. In addition, AMBA has put specific focus on attracting young people to our industry looking for a career where they can develop skills, build their qualifications and support their ambitions. We must raise awareness of varied and exciting jobs in builders merchants and suppliers through campaigns and education channels. There is a need to develop and drive new initiatives that promote careers for young people and then encourage them to stay. Our industry is exciting, yet awareness is low and there is little motivation to join.

What have been the main challenges for your individual members? Have they themselves identified any key challenges that they face as merchants?

Members work hard to stay abreast of the market’s continuous evolution and we continually share our ideas to ensure all members benefit from each other. Day-to-day challenges include price inflation, product shortages, online retail and poor quality, counterfeit products reaching the market through non-merchant channels. A broader challenge is the fact that technology is an increasingly large part of people’s lives and the rise of digital technology is impacting our industry and forcing us to adapt. This isn’t a problem where you can go and buy a solution, it is a set of capabilities that members are building to adapt to challenges, improve efficiencies and grow business. Technology needs to be applied to enhance the customer experience. We need to adapt technology to make the customer experience frictionless.

A big challenge for our industry is attracting, retaining and developing staff. Attracting this new talent is not always easy. Awareness of this industry is low and what people think they know is often incorrect or negative, so there’s little motivation to join. The reality is, it’s a very attractive industry with tremendous career prospects.

The continuous and never-ending challenge is how to improve the customers experience. Customer experience continues to grow in importance and suppliers and merchants must focus on creating an overall customer experience. This experience will be delivered in partnership between the supplier and the merchant so the relationship between the merchant and the supplier is extremely important. In AMBA, members still deal directly with our suppliers and this is vital as the most important element of our future will be our relationship with our suppliers.

At the end of 2017, AMBA announced a group membership agreement with the Builders Merchants Federation (BMF). Tell us about the build up to that agreement, and what the benefits will be for your members.

Allied Merchants Buying Association recognise the need and value of being a member of associations, organisations and federations focused on adding further value to members businesses. Membership of the BMF offered further opportunities particularly in recruitment, awareness and alliance. Our market is somewhat reliant on the UK and with the countdown to Brexit we felt it may be beneficial to be closer to an association that represents merchants and building material suppliers operating in the UK to develop a greater understanding of the issues and implications on both sides.

2018 sees an uncertain Brexit loom ever larger on the horizon. How have you been dealing with the constantly evolving landscape and the potential implications for the industry?

Nobody knows what post Brexit landscape will look like. A hard border will be detrimental to all forms of business in Ireland so hopefully good sense will prevail. Attempting to forecast the future is notoriously unreliable but it is foolish not to consider the possibility of tougher trading conditions as we move toward 2019. AMBA recently expanded into Northern Ireland with our newest member BJ Mullen, and we as a group must ensure our members north and south are adequately informed on impending challenges. We recently completed a two-day visit to the UK where Brexit was part of discussions held. It was insightful to see what steps British merchants are taking in preparation. We are exploring possible scenarios for the building merchants in a post Brexit economy. The basic principle of “stress tests” can be applied to the merchant sector. A series of simple calculations can identify key risks to merchant businesses and doing it now will help produce a plan of action that can be quickly adopted if required. The calculations are applied to scenario’s involving material inflation, shortage of supply, debt, consumer and business confidence.

What are the key developments planned for AMBA in the short-to-medium-to-long term?

The most important element of our future will be our relationship with our suppliers. We are established by the members for the members and operate with the cooperation and support of our supplier partners. We want to sell more of our supplier’s product through our branches and we need to work together to do so. A successful sale for our member is a successful sale for our supplier. We are all part of the supply chain that must end with a customer having a good experience that will increase the likelihood of them staying loyal and endorsing that brand. The marketplace is changing faster than ever and it will be critically important to understand and support each other better so we can satisfy our customer. We have to migrate from short term tactical thinking to long term strategic thinking but continue to increase the volume of business we do with our partnered suppliers as shown in the past, in return for providing the best brands and terms to our members. Another goal is attracting, developing and retaining talented people to represent our members, ensuring stores aspire to the highest level of expertise and customer service is a key development which will help drive business growth of our members.

It is vital we have knowledgeable staff that are well trained and able to provide customers with insight and advice on our suppliers’ product and its applications. Staff are our front line and are the people that engage with our customers. This will differentiate our members from less personable operators.